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Some may argue that the adoption of DAC7 is not a good thing for EU businesses, as European marketplace businesses will incur expenses and administration as they comply. Not forgetting, sellers of goods and services (like creators) might find the request for additional information as intrusive.
However, we don’t see it as all gloomy and dark. This new Directive could offer some benefits that will impact European marketplace businesses. If you’re curious to know how DAC7 can mean a good thing for your business, read on!
Targeted marketing campaign based on collected seller’s data:
If you own a digital platform, one of your targets is probably to reach new markets and find qualified creators on your platform. With the information that DAC7 provides such as seller’s residency and total revenue, you can better understand your target market and create more personalized marketing campaigns. No doubt, this will generate more leads and revenue.
For instance, if your platform operates across multiple EU markets, DAC7 data can reveal which countries your most active sellers are concentrated in - enabling you to target recruitment campaigns, localize support resources, and prioritize market expansion based on actual seller distribution data.
Reduction in administrative costs of digital platforms
Going by the requirements of the new Directive, one might think the DAC7 proposals will lead to more DAC7 administrative work. While this could be true to a point, as the information will now be uniform across the EU, it will create clearer processes of what European marketplace businesses and their sellers will need to do, to become compliant. We see that DAC7 will reduce the administrative burden since the platforms won’t need to deal with multiple national reporting requirements.
Enhancing existing positive network effects of digital platforms
According to Bloomberg Tax, DAC7 is expected to significantly increase cross-border tax information exchange across EU member states, improving the accuracy of tax assessments for platform-based income that was previously difficult to track. This is one of the most concrete benefits of the directive for compliant platforms operating across borders.
DAC7 also promises to increase the winner-take-it-all effect, a case where the top-performing platform takes a greater share in terms of tax benefits. By doing so, it enhances positive network effects that lead to more buyers and increased sales volumes. In the end, big retail giants will have no choice but to keep expanding.
Since every digital platform will have to comply with EU legislation, the number of buyers and sales is estimated to skyrocket. it creates a level playing field for European marketplace businesses.
A practical example: a non-EU platform that previously operated in European markets without reporting seller income now faces the same obligations as a compliant European platform. This removes a historic competitive disadvantage for EU-based businesses that were already following the rules.
Making the digital economy transparent
The core purpose of DAC7 is to foster tax transparency, thereby ensuring that taxable and hard-to-track events are taxed without sellers evading this vital tool. Many might wonder how this is a good thing, but when you look at the bigger picture, it is.
That is good news for the public purse, as well as honest entrepreneurs. Since the new Directive targets platforms based on EU, and non-resident digital platforms that sell to the EU market, it provides a level ground for digital businesses to do business.
A new tool for a new economy
The pace of growth for digital platforms is astonishing, thus providing an avenue for the EU to revive the economy after the pandemic. That is good news to businesses and honest entrepreneurs since it prevents tax fraud, tax evasion, and tax avoidance.
This new development means that digital platforms will need a powerful and flexible VAT compliance technology to handle the additional administrative demands. That is why gig companies and individuals use Gigapay for instant salary payment that is tax compliant.
Gigapay automates the DAC7 compliance workflow for digital platforms - from seller data collection and TIN verification through to annual reporting to tax authorities across EU member states. Book a demo to see it in practice.
FAQ
Q: How can DAC7 benefit digital marketplace platforms?
A: DAC7 can benefit marketplace platforms in several ways: the seller data collected (such as residency and earnings) enables more targeted and personalized marketing campaigns; standardized EU-wide reporting reduces the need to manage multiple national reporting frameworks; and DAC7 enhances positive network effects by creating a level regulatory playing field that favors compliant, established platforms over non-compliant competitors.
Q: Does DAC7 reduce administrative burden for platforms?
A: In the long term, yes. While DAC7 requires an initial investment to set up collection and reporting systems, it replaces fragmented national reporting obligations with a single standardized EU framework. This means platforms operating across multiple EU member states no longer need to manage separate reporting requirements for each country, ultimately reducing ongoing administrative complexity.
Q: Does DAC7 create a level playing field for EU marketplace businesses?
A: Yes. Because DAC7 applies equally to both EU-based platforms and non-EU platforms that sell to EU markets, it removes the competitive disadvantage that compliant European platforms previously faced against less regulated competitors. All platforms accessing EU sellers must now meet the same transparency standards.
Q: How does DAC7 prevent tax fraud in the digital economy?
A: DAC7 requires platforms to report seller earnings directly to tax authorities, making it significantly harder for sellers to underreport income. Because reporting happens at the platform level - where payment data already exists - tax authorities receive accurate, verified income data without needing to investigate individual sellers retrospectively.
Q: Is DAC7 good for honest freelancers and creators?
A: Yes. DAC7 targets tax evasion and double taxation, which directly benefits honest freelancers who are already declaring their income correctly. By ensuring that all sellers operating through platforms are taxed fairly and transparently, DAC7 improves competitive conditions for compliant gig workers and removes the unfair advantage held by those who previously evaded tax obligations.
